NML Capital Ltd v Republic of Argentina [QBD (Comm)]

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeBlair J.
Judgment Date29 January 2009
Neutral Citation[2009] EWHC 110 (Comm)
Docket NumberCase No: Claim No. 2008 Folio 470
Date29 January 2009

[2009] EWHC 110 (Comm)





The Hon Mr Justice Blair

Case No: Claim No. 2008 Folio 470

NML Capital Limited
The Republic of Argentina

Mr Andrew Onslow QC, Mr Jonathan Nash QC and Mr Peter Ratcliffe (instructed by Dechert LLP) for the Claimant

Mr Anthony Trace QC, Mr Benjamin John and Mr Ciaran Keller (instructed by Travers Smith LLP) for the Defendant

Hearing dates: 13 th, 14 th and 23 rd January 2009

Mr Justice Blair

Mr Justice Blair:


In this case, the Republic of Argentina is sued in the English court on a judgment debt. The judgment in question was granted in favour of NML Capital Limited (“NML”), which is a hedge fund, by the United States District Court for the Southern District of New York on 18 December 2006. It is in the sum of US$284,184,632.30 in respect of principal and interest on NML's holdings in a series of bonds issued by Argentina. On 2 April 2008, Mr Justice David Steel made an order granting NML permission to serve the proceedings out of the jurisdiction. In accordance with the usual practice, the order was made by the judge on the papers, the defendant being entitled to apply after service to set the order aside. That is the nature of the present application, Argentina seeking in addition a declaration that the Court has no jurisdiction in respect of the claim brought against it by NML.


In brief, Argentina argues that as a sovereign state, it is immune from suit in the English courts under s. 1 of the State Immunity Act 1978 which provides that, “A State is immune from the jurisdiction of the courts of the United Kingdom except as provided in the following provisions of this Part of this Act”. It says that NML put its case on the loss of immunity before the judge on a legally unsustainable basis—a point which NML now accepts. It says further that NML cannot rely on the arguments it now raises in respect of immunity, since these were not put at the time, the consequence being that NML must start again.


NML says that the matter is governed by s. 31(1) Civil Jurisdiction and Judgments Act 1982 which provides for the circumstances in which a foreign judgment may be enforced in the United Kingdom against a state. Alternatively, it relies on the terms of the bonds. It says that the fact that these points were not raised in the application to the judge does not prevent them being raised now. Argentina has two other arguments. It says that the order should be discharged because of non-disclosure on the application for permission to serve out. Finally, it says that NML's claim is not justiciable in the English courts, because it would involve trespassing upon the legislative or international acts of Argentina, a sovereign foreign state. Both these points are disputed by NML.

The facts


The New York judgment arises out of a claim by NML for breaches of a Fiscal Agency Agreement dated 19 October 1994 between Argentina and Bankers Trust Company pursuant to which series of bonds were issued by Argentina. The series in question comprise holdings in 12% Global Bonds which mature on 1 February 2020, and 10.25% Global Bonds which mature on 21 July 2030.


There is a considerable amount of evidence filed by both parties, but particularly by Argentina. According to the evidence filed on its behalf, on 24 December 2001 Argentina was compelled (by its financial, social and political circumstances) to declare a moratorium on interest and principal payments on its debt, including its external bond debt. In the weeks preceding the moratorium, it was forced to introduce restrictions on the withdrawal of domestic bank deposits. Widespread riots and street demonstrations erupted on the streets of Buenos Aires. The depth of the crisis may be seen in the fact that in the period from 19 December 2001 to 1 January 2002, five people held the office of President of the Republic of Argentina. In January 2002, Congress declared a public emergency and passed an Emergency Law authorising all necessary measures to deal with the country's debt.


NML is a company incorporated in the Cayman Islands, and is an affiliate of Elliott Associates LP, a New York based hedge fund, which among other things trades in distressed sovereign debt. Argentina's evidence is that the bonds in question were purchased by NML's affiliates at various times from 6 June 2001 to 2 September 2003 at an aggregate price of 55.37% and 62.82% of the face value of the respective series. In November 2003, NML declared Events of Default under the Fiscal Agency Agreement in respect of the bonds, relying on the December 2001 moratorium and subsequent failures by Argentina to pay interest as it fell due on the bonds. Shortly afterwards, it issued the New York proceedings seeking accelerated payment of the principal amounts of the bonds, as well as the interest that had by that time fallen due.


Meanwhile, Argentina was seeking to restructure its external debt to a sustainable level. Its evidence is that these efforts were actively encouraged by the G-7 nations, as well as by international financial institutions such as the IMF and the World Bank. The final step in the restructuring came in 2005. On 14 January 2005, Argentina launched an exchange offer pursuant to which bondholders could exchange a large number of different series of bonds for new debt that Argentina would issue. I am told that the exchange offer was accepted by holders of 76.15% of the aggregate eligible debt, making it the largest sovereign debt restructuring in history.


The 2005 exchange offer contained a “most favoured bondholder” clause, which provided that if Argentina were to offer better terms to “holdouts”—in other words parties which refused to participate in the restructuring—it would be required to give the same improved terms to those creditors who had previously accepted the exchange offer. Its evidence is that the purpose of the offer was to achieve, to the extent possible within the constraints of Argentina's limited resources, a global solution that would satisfy on the basis of fair and equitable treatment for comparable creditors the rights of all the bondholders. A related aim, it is said, was to avoid a race to litigate, in which professional litigators might seek (i) to secure payment in full and (ii) thereafter strip Argentina's remaining assets, destroying any prospect of further investment to the detriment not only of the other bondholders but also of Argentina and its people.


Argentina describes NML as a “holdout”. That description is disputed by NML, which contests the account given by Argentina in certain respects. But it is the case that NML declined to participate in the 2005 exchange offer, preferring to pursue the New York proceedings instead. On 11 May 2006, Judge Thomas P. Griesa, who I am told is responsible for overseeing all actions in the US District Court for the Southern District of New York against Argentina relating to its 2001 debt default, granted NML a motion for summary judgment, and on 18 December 2006 entered judgment in NML's favour in the figure I have already mentioned, namely US$284,184,632.30 plus interest compounded annually. There are on-going enforcement related proceedings in New York, and I am told that the judge has made comments critical of Argentina in this context. In any case, NML now wants to enforce the judgment in this country, which is what has given rise to the current proceedings.

The basis on which the sovereign immunity point was put on the application for permission to serve out of the jurisdiction


As is well known, there are no statutory provisions allowing for the mutual recognition and enforcement of judgments of the courts of England and the United States. Such a claim brought in the English courts is in the form of a common law action on the foreign judgment, here the New York judgment of 18 December 2006. A “foreign judgment given by a court of competent jurisdiction over the defendant is treated by the common law as imposing a legal obligation on the judgment debtor which will be enforced in an action on the judgment by an English court in which the defendant will not be permitted to reopen issues of either fact or law which have been decided against him by the foreign court” ( Owens Bank Ltd v Bracco [1992] 2 AC 443 (HL) per Lord Bridge at 484A-C). On 14 March 2008, NML applied to the Commercial Court (as I have said on the papers and without notice in the usual way) for permission to serve on Argentina a claim claiming the amount of the New York judgment. The jurisdictional basis of the claim was that it was a claim to enforce a judgment, under the provisions of what was then CPR rule 6.20(9).


In the material submitted to the judge, NML set out the basis upon which it asserted that Argentina, as a sovereign state, was nevertheless not immune from the jurisdiction of the English Courts. In a witness statement dated 14 March 2008, which contained the evidence upon which NML relied in support of its application to serve out, it was stated that, “By the terms of the [Fiscal Agency] Agreement, Argentina waived and agreed not to plead any claim it might otherwise have to sovereign immunity and in any event NML's claim is based upon the Agreement and the Bonds, which are “commercial transactions” for the purposes of sections 3(1) and 3(3) of the State Immunity Act 1978. Argentina therefore has no immunity in respect of these transactions”.


The draft particulars of claim exhibited to the witness statement plead in paragraph 8 under the heading “Waiver of Immunity” that, “By section 22 of the [Fiscal Agency] Agreement Argentina waived and agreed not to plead any immunity in respect of these proceedings. Further and in any event the Agreement and the Bonds are...

To continue reading

Request your trial
4 cases
  • NML Capital Ltd v Republic of Argentina
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 4 February 2010
    ...EWCA Civ 41 [2009] EWHC 110 (Comm)" class="content__heading content__heading--depth1"> [2010] EWCA Civ 41 [2009] EWHC 110 (Comm) IN THE HIGH COURT OF JUSTICE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT QUEEN'S BENCH DIVISION (COMMERCIAL) Mr Justice Before: Lord Justice Mu......
  • NML Capital Ltd v Republic of Argentina
    • United Kingdom
    • Supreme Court
    • 6 July 2011
    ...6 Blair J rejected this procedural objection and found in favour of NML on both the new substantive points [2009] EWHC 110 (Comm); [2009] QB 579. The Court of Appeal reversed Blair J on all three issues [2010] EWCA Civ 41; [2011] 1 QB 8. Aikens LJ gave the only reasoned judgment, with whi......
  • Estate of Michael Heiser and 121 Others v The Islamic Republic of Iran
    • United Kingdom
    • Queen's Bench Division
    • 31 July 2019
    ...statutory formulation, some do not 47 As to which see below 48 With whom Lord Mance (on this point – see [83]) and Lord Clarke agreed. 49 [2009] QB 579; [2009] EWHC 110 (Comm) 50 Blair J's judgment at [20] and [23] 51 On the basis that NML's case was correct, as found, there was no disput......
  • Masri v Consolidated Contractors
    • Cayman Islands
    • Grand Court (Cayman Islands)
    • 8 March 2011
    ...Leung Karl v. Estate Duty Commr., [1988] 1 W.L.R. 1035; [1988] S.T.C. 728, referred to. (4) NML Capital Ltd. v. Argentina (Republic), [2009] Q.B. 579; [2009] 2 W.L.R. 1332; [2009] 1 All E.R. (Comm.) 697; [2009] EWHC 110 (Comm), referred to. (5) New York Life Ins. Co. v. Public Trustee, [192......
1 books & journal articles
  • The Commercial Exceptions to Foreign State Immunity
    • United Kingdom
    • Federal Law Review Nbr. 45-3, September 2017
    • 1 September 2017
    ...495–6 [71]–[79]. 100 Ibid 513 [210]. 101 Ibid 532 [297]. 102 [2011] 2 AC 495 (‘NML Capital’). 103 NML Capital Ltd v Republic of Argentina [2009] QB 579. 104 NML Capital [2011] 2 AC 495. 105 State Immunity Act 1978 (UK) s 3(1)(a). 106 NML Capital [2011] 2 AC 495, 532 [85]. 107 Ibid 539 [114]......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT